Jerome Mayhew: The UK can lead the world in building multilateral carbon pricing

9 Jun

Jerome Mayhew is MP for Broadland.

Last week the Government announced a consultation into the use of a Carbon Border Adjustment Mechanism (CBAM). Right now we are battling a global inflation induced by Covid supply bottlenecks and Putin’s barbaric invasion of Ukraine. But looking back, this small announcement may have just as big an impact on our future economy,

If we fail to bring the international community along the road to net carbon neutrality then the economic consequences, let alone the environmental consequences, will be huge. We have the opportunity to set the course of international debate and shape the carbon reduction agenda in a way that grows our economy.

The Prime Minister recognises this with his 10-point plan for a green industrial revolution. But, important as this is, governments picking technology winners feels like it is missing the key Conservative ingredient that has helped us more than anything else to solve difficult problems, the free market. Why is that, when it comes to carbon emissions, the free market seems to be part of the problem, not the solution?

The answer is that the cist if carbon emissions is not included in most economic exchanges. It simply gets released into the atmosphere without the cost being included in the price. We have tried to tackle with our UK Emissions Trading Scheme, but this only applies to some domestic businesses and not a single import, actively harming our manufacturers in favour of high carbon products from abroad. Economists call this Carbon Leakage.

Since being elected in 2019 I have been arguing that we need a CBAM to apply the same carbon costs to imports as we apply to our own economy. Arguments for a CBAM are growing around the world: the EU published a proposal for a CBAM in July last year and US Senate Democrats released draft legislation to implement a CBAM at the same time.

For the UK the risk is that without international coordination, implementation of CBAMs could degenerate into ‘green’ protectionism, with us on the outside. Brexit allows us to be fleet of foot, to bridge the gap between the US, the EU and other partners in the East. Now is the time for the UK to use our leadership role to rally an alliance of ambitious countries to create multilateral agreement on global carbon pricing.

Momentum for a CBAM is growing in the UK. The cross-party Environmental Audit Select Committee, on which I sit, has recommended that the Government considers CBAMs. Within weeks the Government has acted with a Treasury Ministerial Statement announcing a consultation on how a CBAM could be implemented.

My discussions with ministers and officials at HM Treasury and the Department for Business, Energy, and Industrial Strategy suggests a keenness to explore CBAMs, but as a part of a wider international consensus. The meeting of the G7 next month in Germany provides a perfect opportunity to do just that.

If we can agree an international approach to CBAMs at the G7 (or at least start the conversation) we can avoid the accusations of green protectionism and overcome the risk of a World Trade Organisation challenge, whilst at the same time liberating the free market to reduce carbon use without large scale Carbon Leakage. This could support a renaissance in domestic manufacturing, both in the UK and the rest of the G7, as we take advantage of revitalised domestic supply.

Wouldn’t it be mad to impose an additional tariff on goods whilst fighting global inflation? The answer to that question would be up to the Treasury. It would decide how best to redistribute this novel source of income, allowing significant tax cuts. When the terrible war in Ukraine is history the impact of this policy could be driving lower carbon economic growth for decades to come.

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Virginia Crosbie: Nuclear is key to securing the UK’s energy future

10 Feb

Virginia Crosbie is the Member of Parliament for Ynys Môn.

Nuclear power has a key role alongside renewables in the UK’s clean energy transition through supporting both reliable, low-carbon electricity generation and the future production of hydrogen.

With the lowest lifecycle carbon footprint of all the energy sources, the Government has committed to continuing its development of large and small scale reactors. This has been outlined in several key policy documents, including the 2020 Energy White Paper, the National Infrastructure Strategy, the Prime Minister’s 10 Point Plan for an Industrial Revolution, and most recently the Net Zero Strategy.

My constituency of Ynys Môn (Anglesey), also known as “Energy Island”, is well placed to become a hub for nuclear and other low-carbon energy generation, given its location and skills base, both here and across the wider region. It is particularly encouraging therefore that the Government has shown clear support for the continuation – and expansion – of the nuclear industry in the United Kingdom.

I chair the Nuclear Development Group (NDG) and All Party Parliamentary Group (APPG) on Small Modular Reactors (SMRs), which look to support the deployment of all three “classes” of nuclear – SMR, AMR and large scale and to work with Government and industry on how best to accelerate such a deployment.

Nuclear is one of the largest sources of clean energy used today and will continue to play a critical role in providing clean and affordable electricity. In the future, nuclear will contribute to decarbonisation through heat and hydrogen production, as well as continuing the production of low-carbon, reliable electricity through large, small (SMR) and advanced reactors (AMR). The use of modular manufacturing and changes to nuclear financing will make reactors easier to deploy in pursuit of our net zero goals.

Furthermore, the high temperatures produced by Advanced Modular Reactors (AMRs) could be used directly for Foundation Industries that require continuous and intense heat, whilst the output can also be used in the production of synthetic fuels, such as those being developed for low-emissions aircraft. The Government is taking steps now in order to support the development of small-scale nuclear so that it will play a key role in delivering Net Zero by 2050.

To ensure that the UK can harness this potential, it is imperative that the civil nuclear industry retains its talent and nurtures the next generation. Through apprenticeships, graduate scheme opportunities and the 60,000 highly skilled workers already employed in nuclear, the industry is investing in the skills and development of its workforce right across the UK.

Not all roles mean you need to have a PhD in nuclear physics! The nuclear sector offers a range of apprenticeships as well as graduate positions which can build the skills base ready for new build projects and work across the nuclear fuel cycle in both the civilian and defence fields. Careers are not just limited to technical and engineering roles either, with demand across roles in legal, finance, marketing, and communications, to name but a few.

The age profile in nuclear, like many technical fields, is skewed to the right and can provide large numbers of well-paid jobs across the nuclear supply chain to school, college and university leavers. New nuclear power plants can expect to operate for 60-80 years followed by 15-20 years of decommissioning, providing employment for generations of families, both directly within the facility and indirectly in the wider supply chain. This economic benefit spills into multiple sectors, from the local tax revenue to the provision of services to employees and supply chain partners from haircuts to healthcare.

If we are to meet our climate change commitment, the UK urgently needs to replace and build more nuclear power plants. New nuclear can bring major economic, social and environmental benefits for Ynys Môn and the UK. I remain very hopeful that by working with Government and organisations across the nuclear supply chain, we can see nuclear investment come to Ynys Môn and the wider economy, levelling up areas that have been forgotten and advancing the decarbonisation agenda.

John Redwood: Has the Government met its 2019 manifesto commitments? Here’s my assessment on where we are at.

10 Jan

Sir John Redwood is MP for Wokingham, and is a former Secretary of State for Wales.

Manifestos matter. They are the way for an incoming government to set a direction for the country and to provide a work plan for the civil service to implement.

In 2019 the Conservatives put forward a strong positive manifesto to the public. Its key messages helped the party win its first substantial majority since 1987. The main pledges were getting Brexit done, not raising the three main taxes, reducing immigration and boosting money and personnel in the NHS, the police and schools. There was also a commitment to net zero by 2050 without a detailed road map for the first few years of that long journey.

The Government will comfortably exceed its money pledges to the three main public services singled out for front page promises. I would expect it to hit its recruitment targets for more nurses, doctors, police and teachers over the Parliament. Fifty million more GP appointments should be achievable, maybe with a different balance between face-to-face and remote exchanges. So far so good.

Net zero will be more than honoured by a wide range of initiatives already taken. The danger is in going too far beyond other countries efforts with measures that have serious costs. Making and growing less ourselves to cut carbon dioxide, only to import from big fossil fuel users, is a loss for us and no win for the planet.

More difficulties surround the related issues of getting Brexit done, cutting low and no skilled migration and keeping taxes down. The idea behind these policies is to expand national wealth and income, to promote more prosperity for more people, and to level up the lower income areas and groups.

The policies were right in 2019 and remain right today. The optimistic spirit of the manifesto was its prime attraction. The idea was to boost people’s real incomes through more and better paid work. As the document stated there is “only one way to pay for world class healthcare and outstanding infrastructure and that is to foster and encourage the millions of British businesses large and small that create the wealth of the nation”. Levelling up is above all about individual personal journeys into better and more skilled jobs, into self employment and into ownership of homes and businesses.

Taxes worry people. High tax rates can kill confidence, drive business and investment out of the country and stifle entrepreneurs. The tax rate that collects the highest amount of tax is not the highest tax rate. Politicians who promise lower taxes and then put them up usually come unstuck with the electorate.

The 1974-9 Labour government presided over a nasty recession, raised taxes substantially and suffered a big defeat in 1979. The John Major government stood accused of putting up many taxes by the time of the 1997 election. It was defeated by its own backbenchers over a very unpopular attempt to hike VAT on fuel. The higher taxes contributed to the massive defeat in the general election as the outward reminder of the big Exchange Rate Mechanism recession the government had imposed.

The Labour government in 2010 was crushed by the great banking crash recession it helped bring about. The increases in income tax and fuel duty in its last budget underwrote the unpopularity. The first George Bush was a one term president because he was unable to keep his promise of no new taxes, the best thing he said in the election.

Fortunately this government has recovered the economy quickly from the sharp and sudden economic collapse brought on by anti-pandemic policies. The public is likely to be more understanding of this setback than they were of the big recessions that overwhelmed previous governments. The public will be less understanding if the Government presses on with its increase in National Insurance at a time of squeezed real incomes. It would be bad economics, as the Government needs to promote a further recovery. It is worse politics, taxing jobs and breaking a promise. The Government should drop the idea before it hits wage packets in April.

The Government also needs to redouble efforts to fulfil its promise over immigration. It said Brexit would allow real control over who comes into the country. It promised “We will not allow serious criminals into the country. If people abuse our hospitality we will remove them as quickly as possible”. The UK can now legislate as it wishes to exercise the controls it wants at the borders. The current Bill going through the Commons needs to be fit for purpose to deliver. Only a sharp drop off in illegal migration and in total numbers will now reassure people.

The manifesto showed concern for people’s fuel bills and promised “new measures to lower (energy) bills”. Instead the Government is presiding over a worrying energy shortage. We rely too much on imports, exposing us to the expensive vagaries of European markets during an acute European energy shortage. The manifesto promised the North Sea oil and gas industry ” a long future ahead” before getting to net zero, yet the Government is currently blocking a number of important new gas and oil developments that could ease the supply squeeze. Once again we need to ask why we stop our industry to cut carbon only to import fossil fuels from elsewhere generating extra CO2 to transport them.

The manifesto promised that the whole of the UK would leave the UK together. We were reassured that Northern Ireland with the rest of the UK “would maintain and strengthen the integrity and smooth operation of our internal market”. Work to do there then. The Government needs to remove obstacles to goods moving from GB to Northern Ireland where they are certified as being for UK consumption.

This may require UK legislation to reinforce the message to our officials. It is fully compliant with any reasonable interpretation of the Northern Ireland protocol, which can anyway be suspended if there is diversion of trade. The protocol expresses respect for the UK internal market and is meant to be compatible with other Northern Ireland Agreements that respect the place of NI in the UK. The promise to end the jurisdiction of the European Court over the UK must be carried through.

There are enough potential wins from the freedoms Brexit brings us to be the topic of another article. The manifesto holds out the realistic expectation that government will use its creativity and power to promote a more prosperous UK forged from that independence.

There needs to be more effort to implement that great vision. Success will come if the Government cuts taxes rather than raising them and if it promotes UK production rather than importing more. It needs to concentrate on helping people achieve their aims of better paid and more skilled employment and to do more to create a great environment for setting up and growing a business.

Garvan Walshe: The time for fine-tuning Brexit is over. The Government needs to focus on making the most of their own deal.

6 Jan

Garvan Walshe is a former national and international security policy adviser to the Conservative Party.

It’s a year since the entry into force of the “Trade and Cooperation Agreement” between the UK and the EU, in which the Government chose one of the most decisive forms of Brexit, with Great Britain leaving the Single Market and Customs Union.  And the UK declining to participate as associates in Europol, the Erasmus programme, and the European Defence Agency.

The Government took the view that the terms offered weren’t good enough to satisfy the grievances of those who votedLleave in 2016, and nor, indeed are the terms of the deal it itself negotiated: that’s why it is trying to revise the Northern Ireland Protocol.

But it is now five and a half years since the referendum vote, and even Leave voters are tiring of this approach, with only 48 per cent endorsing the government’s handling. Its time would be better spent making the most of the situation they have crated, instead oftrying to fine-tune the Brexit deal further. Two areas are in particular need of attention.

First, Brexit entails a restructuring of the British economy: the Government needs to focus on maximising economic advantage, rather than seeking to address the grievances that led to Brexit.

And second, now that the UK has left the EU, it needs to exploit its diplomatic relationship with a still reasonably friendly bloc to its maximum, rather than re-fighting the Brexit negotiations.

Economically, new barriers to trade in goods and services have been erected, and the net loss is projected to amount to four per cent of GDP each year in the long run.

Making good this annual loss requires dramatic improvements to productivity. Long term economic growth depends on equipping people with the skills for tomorrow’s economy. This cannot be achieved by policies to improve the conditions for people who lack those skills and are unlikely to acquire them, or be in parts of the country where they could take advantage of them even if they did. Rather, levelling up will only be affordable if productivity can be enhanced elsewhere.

As Richard Baldwin argues in The Great Convergence, modern industrial goods are manufactured in three main geographically concentrated clusters: south-east Asia, North America, and continental Europe. Leaving the EU’s Customs Union is a decision to uncouple the UK from pan-European supply chains.

Leaving the EU has also made it harder to access customers there, limiting Britain’s access to the high-earning part of the European value chain. This leaves two possibilities for profit, increasing access to other parts of the world, and taking new steps in design and invention.

Trade deals alone cannot make up the loss of leaving the EU, because trade is inversely proportional to distance, and the rest of the world is far further away than Europe, but ways of reducing other aspects of what trade economists call “trade resistance” can.

Having cut itself out of the only manufacturing cluster within reach, the UK has to rely on its dominant service sectors. Differences in regulations impede service sector trade, and this is hard to reduce without the sort of enforceable agreements to harmonise them that this Government considers an infringement of sovereignty.

This leaves travel costs and cultural difference. Travel to Europe apart, costs are largely a matter of airport infrastructure and, in the medium term, decarbonising air travel. Reducing cultural difference means persuading more British people to learn languages and about other cultures.

Another aspect of services is people. If more aviation and languages boost service sales abroad, effective immigration policy can boost their creation at home, with the proceeds (because immigration is in virtually any circumstance economically beneficial) being used to build up domestic human capital too.

As David Willets has argued, we should build more universities in places that lack them, so that more young people can participate in the international service economy. All this will better equip the UK economy to thrive outside the EU’s trade structures.

When it comes to relations with the EU itself, the Government should start with an accurate understanding of the organisation it left. The EU is not merely an association of member states, but has acquired some of the powers and apprutenances of a state. That is why British voters wanted to leave, after all.

Yet the Hovernment persists in focusing on bilateral realtionships at the expense of that with the Commission. Even when it does not descend into the absurdity of Lord Frost refusing to call the EU by its name, this fails to recognise the reality of the Commission’s power in trade and economic policy, let alone the fact that the countries still in the EU have decided to pool their powers in Brussels.

So rather than wishing the Commission away, the government needs to seek out a real, mutually beneficial, relationship with it, in areas like research, and security and defence policy, even if closer trade policy is currently off the agenda.

Anti-Brexit opinion, which is concentrated among the young, has consolidated, rather than faded with time. Though it will take some time to work through, the weight of that opinion will eventually be felt, and take Britain back towards a closer relationship with the EU. If the Government wants its Brexit legacy to stand, it had better start thinking how to make it work.

Darren Henry: Driving new growth in the East Midlands

14 Dec

Darren Henry is MP for Broxtowe and Co-Chair of the Midlands Engine APPG.

At the last general election, I was proud to be elected on a manifesto that prioritised two of the biggest challenges facing the UK: tackling the climate crisis and delivering levelling up.

This transformative levelling up agenda sits at the heart of the Government’s ambitions, and stands to galvanise communities that have historically been under-represented and consistently underfunded. As Co-Chair of the Midlands Engine All-Party Parliamentary Group (APPG) I believe nowhere is more in need of this commitment than the Midlands, where 38 per cent of local authorities have been defined as category one: places with the highest levels of identified need for the Government’s Levelling Up Fund.

Levelling up must also actively enable regional collaboration to drive technological advancement and innovation in a range of sectors, by keeping top talent in the region and building on existing expertise.  This exists in our world-leading research institutions, our growing life-sciences and manufacturing sectors, and in our ability to develop and roll-out the technologies which will be key to our transition to a zero-carbon economy, with high-paid, high-skilled green jobs at its heart.

Hydrogen is central to this transition, with the Department for Business, Energy and Industrial Strategy (BEIS) forecasting a need for 5GW of  low carbon hydrogen production capacity by 2030. This represents a huge transformation to our energy system, with potentially staggering impacts for our transport sector, the way we heat our homes and power our heavy industry.

And it is not just the climate which stands to benefit from these plans – with Government funding into our hydrogen economy having the potential to unlock £90 billion of private investment and support 440,000 well-paid green jobs in 2030.

The Midlands is perfectly placed to support this target. We have a proud legacy of manufacturing, a history of automotive production, and are placed at the heart of UK freight and logistics.  This proximity to the aviation sector, combined with plans for the East Midlands Development Corporation and the Freeport at East Midlands Airport mean that, as the UK scales up its production of hydrogen, it will be met by demand for the applied technologies that the Midlands leads on, and that have the power to connect hydrogen generators with consumers.

The Midlands also has the existing industry and academic collaboration, convened by the Midlands Engine partnership, to deliver this transformative step towards maximising the environmental and economic benefits of the fuel of the future, while underpinning the security of our nation’s energy supply.

The Midlands Engine partnership this week launches the pan-regional Hydrogen Technologies Strategy, answering the call made from the Business Department this summer in their own strategy – for business and research all over the UK to collaborate in the shared vision of scaling up hydrogen production and demand.

The Midlands Engine Strategy identifies and connects transformational opportunities through the region’s Hydrogen Technologies Valley. With a vision to deliver high quality job creation and economic growth, the strategy provides a framework for the region’s growth in this vital area.

The benefits on offer include the opportunity to generate over 85,000 jobs through the production, storage and supply of hydrogen; over 60,000 jobs through the decarbonising of HGVs and refuelling infrastructure and almost 2,000 jobs supporting the use of hydrogen as an alternative aviation fuel – all with the potential to contribute £10 billion GVA to the Midlands economy.

At the heart of the Midlands Engine’s strategy is a unified vision and desire to collaborate, particularly in the sectors such as manufacturing, energy and transport, which are vital to the low carbon transition. The strategy will see these sectors, which were once responsible for large-scale emissions, become the key components of a hydrogen economy – where the technologies which the Midlands is renowned for become the driving force in the scale up of hydrogen supply and demand.

Pan-regional partnerships like the Midlands Engine are key to driving this agenda. Our sustained work is vital in bringing stakeholders together, liaising with Government to highlight potential areas for growth and delivering on the needs of business and communities.

As we look to recover from the pandemic and level up across the UK, we must encourage these partnerships and existing collaborations to grow and thrive. That is how we will continue to create environments in which industry expertise can directly shape and guide solutions to the challenges we face as a nation, while delivering long-term, transformative change and level up regions across the UK.

John Redwood: How we can get the public – as well as the world’s biggest polluters – on board with the eco revolution

17 Nov

Sir John Redwood is MP for Wokingham, and is a former Secretary of State for Wales.

Conservatives and greenery go together. We wish to conserve what is best in nature and our environment. Conservatives have often pioneered legislation to improve water quality, clean up our air, protect our countryside and conserve what is best in our landscape and heritage.

Around the country, Conservative Councils are often struggling with the dilemma of people needing affordable homes whilst many others regret the passing of woods and pastures to grow crops of new houses. Many of us share the passion for clean air and water and for the gentle contours of  English rural landscapes.

The levelling up agenda provides a heaven sent opportunity to do something better. There is no reason why planning policies should continue to direct ever more executive homes to the hard pressed South East, when other parts of the country could benefit from the jobs and investment major new housebuilding creates.

Now that in the post-pandemic world more homeworking and remote working is becoming part of our lives, many more people will be freed from the need to live close to London on a commuter pathway. More small businesses and start-up enterprises could be encouraged to establish away from the lure of the capital city. That requires more attractive housing for the investors, managers and entrepreneurs who will help populate the growth and success of areas that are grasping the opportunity to level up.

Levelling up will be a vast series of personal journeys. For everyone in an area that is improving who does set up a business or brings in a new investment, there will be many others who will seize the opportunity to get a better job, to use and develop their talents to advance the new enterprise.

Every major company siting a business premise in a new area represents an opportunity for smaller companies to spring up to supply everything from the lunchtime sandwiches and coffees through to the technology support, the cleaning and components they will need. Every new housing estate creates first round jobs for the building trades to be followed by all the jobs to support new residents in their new homes.

Government’s role is not only to provide better planning policies, but also to help with high quality education and training. Working with business there can be a new can-do approach in places which have been sidelined by investors in recent years. The main thing enterprises need is talented people to work for them and deliver great customer service and product excellence.

Over the last fortnight the UK government has valiantly tried to craft worldwide agreement over the issue of climate change. It was always a difficult task. India, China, and Russia, three of the largest producers of carbon dioxide on the planet, were never going to agree to curb their appetites for burning coal, oil and gas. China accounts for some 30 per cent of the total world creation of additional carbon dioxide, and has decided to mine more coal and build more coal power stations.

The conference was divided on the very issue of whether coal burning should be completely phased out worldwide or not. In the end the assembled countries could only agree to a diluted sentiment that coal would be phased down, without timetables or pledges from the main users of the fuel.

Germany kept a low profile, though it as an advanced country is holding out to burn coal in power stations through to 2038. The Greens are wanting to form part of the new governing coalition after the recent German  election, and are pressing to bring this down to 2030 to bring Germany a bit closer to other advanced countries and the UN approved policy of phasing out coal quickly. It still shows how difficult it is to agree the end of coal when a major advanced industrial country clings to it as a prime source of enegry.

The problems besetting COP26 were not just the divided world over how feasible it is to decarbonise, nor even just the disagreement over how much money rich countries should send to poorer countries to help them change. Central to the whole debate is the question of people’s buy in to what the transition means for their own lifestyle. It is only when there are sufficient affordable and good products available to heat your home, to travel to work and to fill your plate with carbon free food will the green programme take off.

So far the elites who come to summits have lectured the many that we need to change our lifestyles whilst they themselves fly in jet planes to air conditioned hotels to eat meat diets, as if none of their advice applied to themselves. When challenged they might claim that they have spent money on carbon offsets, whilst seeing no choice for their own purposes but to carry on using jet fuel, gas heating, traditional food products and the rest.

The digital revolution sweeps all before it without government requests or demands, without subsidies and taxes to drive it. People want mobile and smartphones, computer pads, entertainment downloads and the other services that the digital giants can offer. For COP26 to succeed it needs to spawn a new generation of products and services that meet the carbon requirements whilst also being affordable and better solutions to the problems of everyday life.

Levelling up can of course help produce the range of new jobs and skills which a popular green revolution could generate. The main thrust is to electrify much more of life and then to generate more power from renewable or carbon neutral sources of energy. As governments bring this about they need to reassure people that there are ways of keeping the lights on when the wind does not blow and the sun does not shine.

COP26 set up various working groups of countries to explore new technologies to provide better travel, heating and industrial process. The sooner they produce results the better. If there are more breakthroughs with cheaper and better ways of doing these things that cut the carbon, then India, China and Russia will also want to adopt them. If there are not, even the advanced countries will find it difficult to sell the practice of decarbonisation to their own electors.

Emily Carver: The UK’s efforts against climate change will mean nothing without the world’s biggest polluters onboard

27 Oct

Emily Carver is Media Manager at the Institute of Economic Affairs.

The pinnacle of every environmentalist’s calendar is upon us! With only four days to go until COP26, ministers are falling over themselves to talk up the conference.

Their adoption of the language of crisis is stark: Alok Sharma has said that “If we don’t act now, the end destination is climate catastrophe”; the Prime Minister has warned that we must act “before it is too late”; while Downing Street has even hosted a ‘Kids Climate Press Conference’ to help win the “fight against climate change”.

Outside of government, the refrain that we’re not going far enough continues. Activist Greta Thunberg is rallying the troops to join the climate strike in Glasgow. National treasure David Attenborough has delivered his annual warning to save the planet from extinction. And then there’s the interventions from our favourite luvvies, like Ab Fab’s Joanna Lumley, who has suggested with all seriousness that we “go back to some kind of system of rationing”.

The problem with all this, of course, is reality. A month ago, Johnson hailed COP26 as a “turning point for humanity”. Now, the chances of COP26 success are “touch and go”, as he told children that he’s “very worried” the conference may not secure the agreements needed to avert climate change.

The harsh truth is that our entire net zero strategy relies on other countries following suit. Acting alone, or even with similar-minded nations, will make little to no dent in global emissions. This is not controversial. Indeed, it was acknowledged at the time of the formation of the Climate Change Committee, the independent body that is responsible for advising government on climate policy, that the success of the UK’s decarbonisation strategy depends on high-emitting countries adopting similar carbon targets to our own – otherwise, our efforts to prevent climate change would prove utterly futile.

It’s true that more and more people are demanding for something to be done to avert the rise in global temperatures. A new poll undertaken by the UN Development Programme and the University of Oxford, found that 65 per cent of the nearly 700,000 adults surveyed across G20 countries believe climate change is a ‘global emergency’. Whether this translates to advocacy for specific or costly policies that hit people in the pocket is, of course, harder to gage.

But, while the public calls on the UK government to do more, global carbon emissions are only on their way up. According to the World Meteorological Organization, even though the pandemic saw a 5.6 per cent overall decline in emissions of carbon, the build-up of warming gases in the atmosphere rose to record levels; it is predicted that this will drive up temperatures in excess of the goals of the Paris Agreement of two per cent. The UN has also issued a warning that greenhouse gas emissions are on course to be 16 per cent higher by 2030 than they are now.

Many high-emitting nations are either avoiding COP altogether or stalling when it comes to committing to carbon targets. China has said that fossil fuels will form less than 20 per cent of its energy mix by 2060, and that it will peak coal emissions by 2025. Hard to believe, considering it continues to invest in new coal mines and, last year, built more than three times as much new coal power as the rest of the world combined.

Crucially, it has also made clear that climate policy will not come at the expense of its other priorities, including energy security and other economic interests. Then, there’s Putin, who has now committed to reaching net zero by 2060, but will not show his face at the climate summit. And at the same time, leaked documents show that countries including Saudi Arabia, Japan, Australia, and India are reportedly lobbying the UN against moving away from fossil fuels.

This is not to say that the UK and others should give up on going green. The possibilities of green technology are hugely exciting, and the benefits to our economy of pioneering new eco-friendly innovations are very real. However, it would be deluded to believe that the likes of China and India will come to the world’s rescue and slash their carbon emissions in line with our own – at least not anytime soon.

As a new paper from the Institute of Economic Affairs lays bare, the UK’s Climate Change Committee has failed to address the reality that it is highly unlikely that the UK’s leadership and influence will be enough to bring about the reductions in global emissions, and limit temperature rises, to the levels considered necessary to avert damaging climate change.

Therefore, if the world is indeed heading towards climate catastrophe, the UK desperately needs a rethink. First, we should ask why is the CCC and government prioritising mitigating climate change over climate adaptation? Why are we putting our energy security at risk, by subsidising green technologies that may or may not stand the test of time? And, crucially, why is the CCC and government not asking if the costs borne by British taxpayers, consumers and businesses have yielded proportionate benefits?

Over the next two weeks, we’ll see world leaders flexing their muscles, extolling the importance of cutting emissions to avert climate change. However, as it becomes ever more obvious that a global consensus is a pipedream, it’s clear we urgently need a review of our climate policy priorities – and an injection of realism.

Sam Hall: We should urgently wean ourselves off gas – and not give up on Net Zero

24 Sep

Sam Hall is the Director of the Conservative Environment Network.

Energy prices are rising sharply as we head into the autumn. This is causing short-term pressure on household bills, hiking the cost of living, and exacerbating fuel poverty.

The principal reason is that global gas prices have spiked, pushing up domestic prices by more than 250 per cent since the start of the year.

This is due to rising demand for gas in Asia and Europe as the global economy picks up post-Covid, and Putin’s Gazprom restricting supply through Ukraine, likely in a bid to apply pressure on Brussels to approve the Nord Stream 2 gas pipeline.

But instead of drawing the conclusion that we should urgently wean ourselves off gas, some have attempted to blame the Government’s Net Zero agenda.

Some, for instance, claim that low wind output is driving up prices. It is true that wind speeds have been lower than normal this month. Wind is intermittent, so there will be days when wind is low which will push up prices, and days when it’s high which pushes down prices.

But price impacts from variable wind output typically last days, rather than months, and do not cause chronic price rises like we’re seeing now. Indeed power prices are already falling again, precisely because wind speeds are picking up.

As an aside, due to the fact wind turbines are getting bigger, their “capacity factor” (i.e. the amount of generation relative to generating capacity) is increasing. This means that offshore wind farms coming online now will produce electricity more consistently than their predecessors – a further example of how private sector-led innovation is driving us towards Net Zero.

Some commentators have blamed the “green levies” on energy bills. Yet there are hardly any levies on gas bills (around two per cent of the bill), and they are a smaller share of people’s electricity bills (23 per cent) than the wholesale price (30 per cent).

These levies also fund crucial fuel poverty schemes, not just legacy renewables projects. Although levies are going up as new renewables and nuclear come online, this is gradual and doesn’t cause spikes like the current one.

Offshore wind strike prices are less than a quarter of what they were in 2015. The level of subsidy required by new UK offshore wind projects is minimal, potentially even negative if wholesale prices continue to grow year-on-year. Substantial future rises in these levies from the Government’s commitment to quadruple offshore wind capacity are unlikely.

Finally, others have argued that green policies blocked fracking, which would have cut gas prices. But as even fracking companies admitted back in 2013, domestic shale gas extraction wouldn’t have cut bills.

Our fracked gas would have been traded as part of a large European market, meaning there would have needed to be an implausibly large amount of new UK gas to disrupt the balance of supply and demand in Europe enough to push down prices here.

So if Net Zero isn’t to blame, how should the Government respond? One idea gaining traction is to take environmental levies off people’s bills. Although the levies aren’t the cause of the price spike, removing them would offer some relief to consumers by delivering an immediate cut to their electricity bills in particular.

Since they are underpinned by legally-binding contracts with energy generators, the levies must be funded by other means. The Treasury could temporarily fund them out of general taxation.

But since this would be expensive, once gas prices have fallen, the Treasury could introduce a small carbon charge on gas bills to cover the costs of the levies longer term.

Gas bills currently have no carbon price, a reduced VAT rate, and hardly any levies, despite the fact it’s now a higher carbon fuel than electricity. This creates precisely the wrong economic incentive for consumers and businesses when they are deciding what new heating system to buy.

To protect those in fuel poverty, as I argued a few months ago on this site, some of the revenue from the gas carbon charge could be recycled and given back as a carbon cheque to people in receipt of Universal Credit and other vulnerable households.

Cutting electricity prices in this way would have a range of benefits. Many of the poorest energy customers use electricity for heating. They’d face no gas carbon charge and pay lower levies, so this would reduce fuel poverty.

It would also support heat pump deployment, critical for reducing our gas dependence and reaching Net Zero, by reducing their running costs relative to gas boilers. Similarly, it would incentivise more industries to switch to lower-carbon electricity, while boosting the competitiveness of those already using electricity.

Another option that the Treasury will currently be considering is simply subsidising the energy bills of the most vulnerable households. This would deliver short-term relief and would target public funds at those most in need, but wouldn’t move us longer term away from gas.

We’d risk a repeat of this problem in a few years’ time when gas prices inevitably spike again. And if the Treasury has to issue more short-term relief, it could end up being worse for the public purse.

Longer term, the Government needs to accelerate its deployment of renewables. Renewables are cheaper than new fossil fuel generation, support tens of thousands of jobs in our industrial heartlands, and reduce our dependence on volatile gas. As well as rolling out the cheaper, more established renewables, we should scale up support for nascent renewable technologies such as floating offshore wind and geothermal.

The £9.2 billion energy efficiency fund from the Conservative manifesto should be delivered in next month’s spending review and front-loaded as much as possible. Better home insulation will mean people using less gas to keep their homes warm, delivering short-term bill savings and reducing gas demand.

And, finally, we need to reform the Capacity Market – the Government’s policy for buying reserve generation capacity to ensure security of supply – so it actually brings forward new, clean, flexible storage and generation technologies, and doesn’t just subsidise existing gas power stations. This would also make us less reliant on volatile gas as a back-up for wind.

This is a worrying time for billpayers and lays bare the cost of our gas dependency. The Government should act now to relieve some of the pressure on people’s cost of living at the same time as driving forward its Net Zero agenda. The two go hand in hand.

Chris Skidmore: Net Zero will mean nothing unless we can convince the highest emitting countries to change also

11 Aug

Chris Skidmore MP was Science Minister 2018-2020 and Energy Minister in 2019. He is a Senior Fellow at the Mossavar-Rahmani Center of Government at Harvard Kennedy School.

Two years have passed since the UK became the first G7 country to legislate for “Net Zero”. Since then, over 70 per cent of the world’s surface has made a commitment to neutralise their carbon emissions by 2050. Still disagreements persist as to how exactly Net Zero can be achieved, or even how it should be defined.

With the target likely to come under increasing focus in the run up to COP26 in Glasgow, now less than 100 days away, already research is demonstrating that companies’ “carbon offsetting” strategies are not only inadequate, requiring a land mass five times the size of India to plant trees, they may also end up causing more harm than good – as the carbon emitted from the wildfires burning in US forests especially planted to sequester carbon now becomes further part of the problem rather than the solution.

With these debates raging alongside this summer’s wildfires, it is clear an effective strategy to achieve Net Zero remains in a state of flux. It’s one of the reasons I’ve decided to take up a research post as a Senior Fellow at Harvard Kennedy School, looking in detail at how we can not only achieve Net Zero most effectively, but also to question whether the target is the right one, and what mitigating factors need to be put in place to account for unknowable events in the future— in the next 29 years, global change, war, natural disaster, could all sweep Net Zero off the map.

We need not only a strategy, but an insurance policy too. For every policy, policymakers must also have due regard to the fact that for every action, there will be reaction, just one of the plethora of unintended consequences that have to be guarded against. Having signed Net Zero into law as then Energy Minister back in 2019, I’m acutely aware that unless the idea of transformation and change works with local communities, the risk of a backlash to any green policies could end up causing delay and dither.

For the UK’s own Net Zero strategy, already we are witnessing the beginning of a transformation towards a green economy, with enormous potential to further regenerate post-industrial communities as a result- as has been highlighted by several contributors in ConHome’s series on Net Zero. But we all know that even if the UK achieves it’s own Net Zero ambitions, it will mean nothing unless we can convince the highest emitting countries to change also. And it will be in Asia that Net Zero will either succeed or be broken altogether.

One just has to look at the numbers to realise that without China and India onboard, the ability to tackle climate change will become a losing battle. With an estimated 70 per cent of global carbon emissions coming from cities, over 52 per cent of the world’s urban greenhouse emissions come from just 25 cities.

23 of those cities are all based inside the People’s Republic of China, with the worst being Handan, Shanghai, Suzhou, Dalian and Beijing, all with greenhouse gas emissions higher than 130 megatons of CO₂ equivalent. According to IQAir, a Swiss-based air quality organisation which works with the UN Environment Programme (UNEP), UN-Habitat, and Greenpeace, 148 out of the top 150 most polluted cities in 2020 are in Asia.

Alok Shama is rightly using his position as COP26 President to call for a global end to coal, yet Chinese and Indian buy-in to this programme will be essential for its success. While pledging in 2016 during the Paris Agreement to reach peach CO₂ emissions by 2030, China built more coal power plants in 2020 than the entire world retired.

Already China has nearly four times as many coal power plants than the next largest country, India. In 2020 alone, China’s coal usage accounted for 76 per cent of the global new coal capacity, adding 38.4 gigawatts directly from new coal plants. Moving forward China is currently building an additional 88.1 gigawatts of power from coal, with another 158.7 gigawatts of power from coal power plants having already been proposed to the central government.

These are the simple facts that anyone who wishes to reduce global carbon emissions faces. The geopolitical reality facing any Net Zero strategy is that China’s growth will continue to define the 21st century. There is no choice but to work together with China to achieve joint successful outcomes to reduce carbon emissions.

Playing the blame game on carbon emissions is ultimately pointless as it achieves nothing. It is not a weakness either to recognise that we all have a shared future on the earth, and we must build partnerships that share how we can deliver transformations that can prevent drastic climate change before it is too late.

If China fails to reduce its greenhouse gases, we all fail. If ever there was a need for a “Nixon in China” moment, we need COP26 to deliver it if Net Zero has any chance of success.

Emily Carver: If the public face of COP26 won’t buy an electric car, don’t expect the public to be on board with Net Zero

4 Aug

Emily Carver is Media Manager at the Institute of Economic Affairs

The Government’s Net Zero strategy is unravelling from the inside out. Last week, it was reported that the Prime Minister – who seems increasingly to be governing by U-turn – may push back the ban on gas boilers, due to growing backlash over the cost of reducing our emissions.

This week, Number 10’s climate change spokesperson Allegra Stratton said she didn’t “fancy” buying an electric car, and would continue driving her diesel, only days after having called on the public to go “One Step Greener” by, among other “micro-steps”, walking to the shops instead of driving.

This is just a snapshot of the inconsistency of the Government’s green messaging. Why should a household invest in green technology, only for the policy to be reversed or delayed? Who would bother scrapping their diesel or petrol vehicle, when the public face of COP26 has decided herself not to go electric?

Of course, when polled, the majority of the public support addressing climate change. Who wouldn’t want a greener, more sustainable planet? However, as is the case with so many policies, it is far easier to support a rosy abstract goal than it is to face its real-life consequences.

The green agenda is no doubt important – not least for our own quality of life – but, as many have warned, arbitrary targets set by ministers lead to poor – and often frenzied – policies. Fundamentally, the plans rely on the false assumption that ministers and bureaucrats are best placed to pick winners when it comes to technology and the future of energy. Successive governments have shown this manifestly not to be the case.

Further, the idea that we must reach “Net Zero” is in itself a misguided aim, lending itself to an “at all costs” strategy, much like those who back a “Zero-Covid” strategy. This is what has led to an over-reliance on heavy-handed prohibitions – such as the ban on sales of petrol and diesel cars – rather than the use of price incentives.

For politicians, there is little in the way of accountability. Setting a target for three decades in the future is illusory, lending itself to virtue-signalling and ill-thought-out measures. Fundamentally, it overestimates the Government’s ability to plan ahead. Who could possibly believe that officials would be able to predict the state of the energy sector in three decades? It would be far preferable for the Government to set a price for carbon, adopt a technology-neutral approach, and allow technologies to compete.

It is concerning that ministers continue to use the language of “crisis” and “emergency” when discussing climate change. As we’ve seen over the course of the pandemic, this kind of rhetoric has been deployed when justifying government by decree, lockdown measures and prohibitions. Could it be that the same could be used on the basis that we face a climate emergency? Perhaps the lunatic idea that we might lockdown to protect the planet isn’t as farfetched as it sounds.

However, as the costs of Net Zero become more widely known, it is likely that those who have up till now acquiesced with the Government’s plans will begin to make their voices heard – particularly at a time when inflation and tax hikes are on the horizon. Even the broadcast media, which has been overwhelmingly supportive of Net Zero, is beginning to raise questions about – and publicise – the cost of the Government’s proposals.

This month, the Office for Budget Responsibility has estimated the total cost of reaching Net Zero by 2050 could reach £1.4 trillion. Lord Lawson has predicted the true cost could be twice this. The Government’s infrastructure adviser has said that families will have to pay up to £400 more a year for food, gods and travel to allow polluting industries to capture their carbon emissions. It is likely that this will also be an underestimation.

It is often argued that despite the fact Britain accounts for a tiny proportion of the world’s carbon emissions we must set an example for other countries to follow. Sure, this may be admirable – and we should do so to some extent – but when China and India are industrialising at the rate of knots, expanding their coalmine capacity year on year, it becomes harder to defend the Government’s arbitrary targets. If the aim is to drive down global temperatures, our efforts will appear to an increasing number of people as little more than an act of economic self-harm.

It has been argued that the Government should be honest about the costs of Net Zero and the impact it will have on our lives. As the media catches on, politicians and the green lobby can no longer shield the truth from the public. People are unlikely to take kindly to a dramatic, government-imposed reduction in their living standards and hikes to their cost of living. Any Net Zero policy that doesn’t command the support of the public is doomed to failure.